[Federal Register Volume 85, Number 60 (Friday, March 27, 2020)]
[Notices]
[Pages 17374-17375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06392]


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SECURITIES AND EXCHANGE COMMISSION

[Release no. 33821]


Investment Company Act of 1940; Order Under Sections 6(c), 
12(d)(1)(J), 17(b), 17(d) and 38(a) of the Investment Company Act of 
1940 and Rule 17d-1 Thereunder Granting Exemptions From Specified 
Provisions of the Investment Company Act and Certain Rules Thereunder

March 23, 2020.
    The current outbreak of coronavirus disease 2019 (COVID-19) has 
disrupted activities around the world. In light of the current 
situation, we are issuing this Order providing exemptions from certain 
requirements of the Investment Company Act. The exemptions provide 
additional flexibility for (1) registered open-end management 
investment companies other than money market funds (``open-end funds'') 
and (2) insurance company separate accounts registered as unit 
investment trusts (``separate accounts'') to obtain short-term funding.
    In light of the current and potential effects of COVID-19, the 
Commission finds that the exemptions set forth below, as applicable:

    are necessary and appropriate in the public interest and 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Investment Company Act;
    permit transactions the terms of which, including the 
consideration to be paid or received, are reasonable and fair and do 
not involve overreaching on the part of any person concerned;
    permit transactions under the terms of which the participation 
of each registered investment company is consistent with the 
provisions, policies, and purposes of the Investment Company Act, 
and not on a basis different from or less advantageous than that of 
other participants; and
    are necessary and appropriate to the exercise of the powers 
conferred on it by the Investment Company Act.

    The necessity for prompt action of the Commission does not permit 
prior notice of the Commission's action.

I. Time Period for the Exemptive Relief

    The relief provided in each of the following Sections of this Order 
is limited to the period from (and including) the date of this Order to 
(and including) the date to be specified in a public notice from 
Commission staff stating that the relief will terminate, which date 
will be at least two weeks from the date of the notice and no earlier 
than June 30, 2020.
    The Commission will continue to monitor the current situation and 
may issue other relief as necessary or appropriate.

II. Ability of Open-End Fund or Separate Account To Borrow From an 
Affiliated Person; Ability of an Affiliated Person To Make 
Collateralized Loans

    It is ordered, pursuant to Sections 6(c), 17(b) and 38(a) of the 
Investment Company Act that:
    For the period specified in Section I, an open-end fund or a 
separate account is exempt from section 12(d)(3) of the Investment 
Company Act to the extent necessary to permit it to borrow money from 
any affiliated person, or affiliated person of such affiliated person, 
that is not itself a registered investment company, and an affiliated 
person of an open-end fund or separate account, or an affiliated person 
of such affiliated person, is exempt from section 17(a) to the extent 
necessary to permit it to make collateralized loans to such open-end 
fund or separate account, provided that the conditions below are 
satisfied.
    For the period specified in Section I, an open-end fund is exempt 
from section 18(f)(1) of the Investment Company Act to the extent 
necessary to permit it to borrow money from any affiliated person, or 
affiliated person of such affiliated person, that is not a bank and is 
not itself a registered investment company, provided that the 
conditions below are satisfied.

Conditions

    (a) The Board of Directors of the open-end fund, including a 
majority of the Directors who are not interested persons of the open-
end fund, or the insurance company on behalf of the separate account, 
reasonably determines that such borrowing:
    (i) Is in the best interests of the registered investment company 
and its shareholders or unit holders; and
    (ii) will be for the purpose of satisfying shareholder redemptions.
    (b) Prior to relying on the relief for the first time, the open-end 
fund or separate account notifies the Commission staff via email at [email protected] stating that it is relying on this Order.

III. Interfund Lending Arrangements for Registered Investment Companies 
With Existing Interfund Lending Orders

    It is ordered, pursuant to Sections 6(c), 12(d)(1)(J), 17(b),17(d) 
and 38(a) of the Investment Company Act and rule 17d-1 thereunder that:
    For the period specified in Section I, any registered investment 
company currently able to rely on a Commission order permitting an 
interfund lending

[[Page 17375]]

and borrowing facility (``existing IFL order'') may:
    (a) Make loans through the facility in an aggregate amount that 
does not exceed 25 percent of its current net assets at the time of the 
loan notwithstanding any lower limitation in the existing IFL order;
    (b) Borrow (if permitted under the existing IFL order to be a 
borrower) or make loans through the facility for any term 
notwithstanding any conditions limiting the term of such loans, 
provided that (i) the term of any interfund loan made in reliance on 
this Order does not extend beyond the expiration of this temporary 
relief, (ii) the Board of Directors of the registered investment 
company, including a majority of the Directors who are not interested 
persons of the registered investment company, reasonably determines 
that the maximum term for interfund loans to be made in reliance on 
this Order is appropriate, and (iii) the loans will remain callable and 
subject to early repayment on the terms described in the existing IFL 
order; and
    (c) Avail itself of the relief provided in Section V below 
notwithstanding any condition of the existing IFL order that 
incorporates limits set forth in its fundamental restrictions. 
limitations or non-fundamental policies;

provided that, in each case:

    (a) Any loan under the facility is otherwise made in accordance 
with the terms and conditions of the existing IFL order;
    (b) Prior to relying on the relief for the first time, the 
registered investment company notifies the Commission staff via email 
at [email protected] stating that it is relying on this Order; 
and
    (c) Prior to relying on the relief for the first time, the 
registered investment company discloses on its public website that it 
is relying on a Commission exemptive order that modifies the terms of 
its existing IFL order to permit additional flexibility to provide or 
obtain short-term funding from its interfund lending and borrowing 
facility.

IV. Interfund Lending Arrangements for Registered Investment Companies 
Without Existing Interfund Lending Orders

    It is ordered, pursuant to Sections 6(c), 12(d)(1)(J), 17(b), 17(d) 
and 38(a) of the Investment Company Act and rule 17d-1 thereunder that:
    For the period specified in Section I, any registered management 
investment company that is not currently able to rely on a Commission 
order permitting an interfund lending and borrowing facility may 
establish and participate in such a facility as set forth in an 
exemptive order permitting such a facility that the Commission has 
issued within the twelve months preceding the date of this Order 
(``recent IFL precedent''); provided that:
    (a) The registered investment company must satisfy the terms and 
conditions for relief in the recent IFL precedent (including with 
respect to whether it may participate as a borrower), except:
    i. It may rely on the relief provided in Section III above subject 
to its terms and conditions (other than the notice requirement of 
condition (c) in Section III);
    ii. It need not satisfy the condition in the recent IFL precedent 
requiring prior disclosure in its registration statement or shareholder 
report; and
    iii. Money market funds may not participate as borrowers in the 
interfund facility;
    (b) Prior to relying on the relief for the first time, the 
registered investment company notifies the Commission staff via email 
at [email protected] stating that it is relying on this Order 
and identifying the recent IFL precedent that it is relying on; and
    (c) The registered investment company:
    i. Discloses on its public website, prior to relying on the relief 
for the first time, that it is relying on the relief to utilize an 
interfund lending and borrowing facility.
    ii. To the extent it files a prospectus supplement, or a new or 
amended registration statement or shareholder report, while it is 
relying on this relief, updates its disclosure regarding the material 
facts about its participation or intended participation in the 
facility.

V. Ability of a Registered Open-End Investment Company To Deviate From 
Its Fundamental Policy With Respect To Lending or Borrrowing

    It is ordered, pursuant to Sections 6(c) and 38(a) of the 
Investment Company Act:
    That for the period specified in Section I, an open-end fund is 
exempt from sections 13(a)(2) and 13(a)(3) of the Investment Company 
Act to the extent necessary to permit it to enter into otherwise lawful 
lending or borrowing transactions that deviate from any relevant policy 
recited in its registration statement without prior shareholder 
approval; provided that:
    (a) The Board of Directors of the open-end fund, including a 
majority of the Directors who are not interested persons of the 
investment company, reasonably determines that such lending or 
borrowing is in the best interests of the registered investment company 
and its shareholders;
    (b) The open-end fund promptly notifies its shareholders of the 
deviation by filing a prospectus supplement and including a statement 
on the applicable fund's public website; and
    (c) Prior to relying on the relief for the first time, the 
registered investment company notifies the Commission staff via email 
at [email protected] stating that it is relying on this Order.

    By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-06392 Filed 3-26-20; 8:45 am]
 BILLING CODE P